Revenge of the Trolls: Back to Square One for Apple

“To live is to war with trolls,” said Henrik Ibsen. Well, Apple Inc (“Apple”) has recently reached an impasse in its war against patent holding firm or “patent troll” Lodsys, LLC.



On September 24, 2013, US District Judge Rodney Gilstrap of East Texas dismissed Apple’s motion to intervene, filed two years ago in 2011, as a defendant-intervener in the action against Apple’s app developers for alleged patent infringement. In the action, Lodsys claimed that small-time iOS app developers were infringing the firm’s patents by using technology such as in-app purchasing and feedbacks surveys, without paying a licensing fee. In other words, Lodsys contended that it owned the technology underlying some of the most basic app functions across mobile operating systems, namely iOS and Android.

Apple’s motion to intervene was recently dismissed on the grounds that the developers had already settled with Lodsys and as such, Apple’s arguments were moot. However, the arguments may still be made in a subsequent action, should the occasion arise. Apple had also filed an opposition to Lodsys’ motion to dismiss, which can be read here.

The motion to intervene was filed right at the heels of Lodsys’ suit, back in 2011, against the app developers, who were understandably relieved to have Apple’s support in the litigation. Prior to Apple’s attempt at intervening, Senior Vice President and General Counsel Bruce Sewell sent an usually detailed letter to the CEO of Lodsys, Mark Small, outlining the lack of merit in the latter’s claims against Apple. While the letter did not prevent Lodsys from commencing litigation, it clearly expresses the tech industry’s position with respect to patent infringement litigation commenced solely for pecuniary ends.

It is not surprising that Sewell might have wanted to say a little more than required to Lodsys in his letter. Lodsys is based in East Texas, which is a jurisdiction now infamous for rulings friendly to “patent pirates.” These shell-companies do not create any products. They exist solely to threaten patent litigation in hopes of a quick and relatively low settlement by targeting companies that will pay out to avoid protracted litigation. In addition to Apple, Lodsys has also brought patent infringement actions against Google Inc, Kaspersky Lab, and most recently, Martha Stewart Living Omnimedia, Inc (“Martha Stewart Living”), amongst others. Patent trolling has become an effective means to a fast settlement.

In Canada, patent trolls are few and far between, but Dovden Investments (“Dovden”) is already a name that might make a developer shudder. Dovden has filed 32 lawsuits in Canada just this year. Recently, Dovden withdrew a suit against a bus app developer originally filed at the Federal Court demanding $10,000 in licensing fees. Perhaps the Federal Court has less of a stomach for such claims. In the United States, Vermont has enacted legislation to address the issue of patent trolling – Bad Faith Assertions of Patent Infringment. (For more information on this patent trolling legislation, see my article Cracking Down on Green Mountain Trolls.) In Canada, however, no legislation yet exists to address this emerging issue, although sanctions do exist for bringing meritless claims.

While Apple is temporarily out of the arena, Martha Stewart Living, as mentioned above, has joined the fight against Lodsys, which claims that the Martha Stewart Weddings iPad app infringes its patents. Martha Stewart Living has filed a complaint  and will be taking the battle home to East Texas, where it all began. Furthermore, Lodsys’ bark might be worse than its bite. When faced with the possibility of real litigation on potentially meritless claims, Lodsys opted to settle for nothing in the suit against Kaspersky Lab.

Ying Cheng is an IPilogue Editor and is in the BCL/LLB program at the McGill Faculty of Law in Montreal, Canada.

One Comment
  1. Your blog gives the impression that all patent trolls are a nuisance: indeed the pejorative “troll” suggests as much. You say “[t]hey exist solely to threaten patent litigation in hopes of a quick and relatively low settlement”. I agree that “patent trolling” can often have a negative impact on innovation, since the money spent on litigation, royalties or damages may be better used by those who bring inventions to the market. But some patent trolls may benefit free markets, especially for start-up entrepreneurs.

    Such a person’s most priced asset may simply be the intellectual property that she owns. If an established player infringes her patent, she may not have the resources to commence litigation. Fortunately, the entrepreneur may then sell her rights to a “patent troll” or seek their help with the litigation. It should be noted that while champerty was frowned on in the past, in modern times, sharing the burdens and profits of litigation is “rarely considered wrong”. Moreover, if there are a number of such willing trolls, she may be able to secure better terms than if there was just one.

    Any reform in this may area may therefore need to focus less on the “nature” of the entity asserting the patent, i.e., whether or not it commercializes inventions should be irrelevant. To reduce unjustified “trolling”, perhaps the focus should shift to the quality of the underlying patent itself. Should underfunded start-ups be deterred from seeking to monetize valid patents against infringers who simply don’t care?

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